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AT&T :: 1963 - Present

AntiTrust III :: The Break-up of AT&T and the Story of MCI

In the 1960s, AT&T had control over 90% of the telephone access lines (the other 10% of the lines were mostly offered by very small companies providing service to remote markets; for example, a rural telephone coop providing service to a few hundred houses in the mountains). AT&T acquired its equipment from sole provider Western Electric. You could have any color phone as long as it was black and Western Electric. Phones were rented to consumers with large profit margins. There was one long distance network: AT&T. End users could not attach their own equipment to the network. The 1956 Consent Decree prohibited AT&T from entering the information services market or to manufacture equipment for services other than regulated telecommunications.

AT&T had market power. It used its market power to extract monopoly rents in horizontal and vertical markets. It only permitted AT&T / Western Electric equipment to be attached to the network - and it charged high prices and rents for that equipment. It also practiced peak demand pricing, charing high prices for long distance service during peak demand - which was during business hours. This created an arbitrage opportunity, for someone to build a business plan that routed around high network feeds.

MCI was an innovative long distance company that radicalized the telecommunications market. Started in the 1960s, the business plan was to use radio licenses to provide long distance service between Chicago and St. Louis. MCI's application to provide service was approved by the FCC in 1969. But AT&T and the BOCs didn't like this much, and refused to interconnect with MCI. MCI had difficulty negotiating interconnection with AT&T, hired special counsel skilled in negotiations, and brought the issue before the FCC. In 1973, AT&T threw a curveball by filing interconnection tariffs in 49 state PUCs, transforming MCI's transaction costs from one interconnection agreement, to 49 different agreements in each jurisdiction. In 1974, AT&T disconnected MCI.

Frustrated, in 1974, MCI, along with the Department of Justice, filed an antitrust suit against AT&T. On June 13th, 1980, the Court ruled in favor of MCI, awarding MCI $1.8 billion in damages. Two years later, AT&T would negotiate with DOJ the resolution of their antitrust lawsuit, agreeing to the breakup of the Bell System.

The remedy broke AT&T up into (A) AT&T long distance and Western Electric and (2) Seven Baby Bell (BOCs) companies. The created divisions between markets: horizontally it created a division between long distance service and local service. Vertically it created a division between the network and network equipment. In effect, the remedy separated the potentially competitive parts of the market from the non competitive parts, opening the competitive markets up to competition and entrance by rivals. The terms of Consent Decree went into effect Jan. 1, 1984.

Did it work? From Divestiture to the era of the Telecom Act of 1996, the long distance market was active with three major players and several others, annoying people with marketing asking whether they would be interested in changing long distance service. Opening the equipment market also resulted in a growth of equipment manufacturers as well as innovation in devices that could be attached to the network such as fax machines and modems. The BOCs, acting as monopolies in their local markets, basically followed the deterrence policy of Mutually Assured Destruction, and refused to enter each other's markets lest competition erode return on investment (as it did during the telephone era of Dual Service or the telegraph era of Wasteful Competition). It would take the Telecom Act of 1996 and the introduction of mobile telephony to introduce competition into the local market.

Scholars have noted that the legal battle with AT&T cost $10m, whereas construction of the network cost $2m. Sterling, Bernt, Weiss, Shaping American Telecommunications, p.133 (2006) According to lore, MCI had more lawyers than land lines. It became known as "a law firm with an antenna on the roof."

In 2005, one of the Regional Bell Operating Companies,SBC, acquired AT&T Long Distance, and emerged from the ashes as a reborn AT&T.

1963

• Dec.: MCI Petition to operate a microwave service between Chicago and St Louis, and interconnection with the AT&T network, filed (Docket 16509) [Hagley]
  • "In 1963, Microwave Communications, Inc., the predecessor corporation to MCI,11 requested permission from the Federal Communications Commission ("FCC") to construct and operate a long distance telephone system between Chicago and St. Louis. The proposed system consisted of a terminal in each city and microwave radio relay towers connecting the terminals. Through this system, MCI intended to provide long distance, private line telephone service to business and industrial subscribers whose needs justified the exclusive or semi-exclusive use of a long distance telephone line. MCI also sought interconnections from its terminals to ordinary local telephone facilities, principally telephone wires running in conduits beneath the street. These interconnections were essential to MCI's ability to do business, since they provided the telephone or computer linkage between MCI's terminals and its individual customers in each city." MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983)

1967

Common Carrier Bureau Hearings on the MCI application (Docket 16509)

1968 Full FCC hearing (Docket 16509)

1969

• FCC Carterphone decision, which let third parties attach equipment to the AT&T network. This permitted MCI to attach its radio service to the AT&T network.
• FCC initiates the Computer Inquiry proceedings
• August 14: FCC approved MCI's license for operation. (4-3 vote) (Docket 16509) This is noted as a huge change in FCC policy, opening the telecom market to competition [Hagley]
  • Microwave Communications, Inc. (Docket FCC No. 16509 et al.) 18 FCC 2d 953 (1969);
  • "In 1969, after lengthy administrative proceedings in which AT&T and the other general service carriers opposed MCI's application, the FCC approved MCI's proposal. Microwave Communications, Inc., 18 F.C.C.2d 953, 966 (1969); 21 F.C.C.2d 190 (1970). The FCC's decision specifically authorized MCI to provide only point-to-point private line service not requiring connection to the nationwide switched network - that is, tie lines that would connect two or more locations without the use of switching machines. 18 F.C.C.2d at 953-54. The FCC also retained jurisdiction to order appropriate local interconnections. The MCI decision resulted in a deluge of new applications to the FCC for authority to construct and operate facilities for specialized common carrier services. MCI filed applications for authority to provide specialized services among more than 100 cities. Other companies filed similar applications, creating a situation in which, in many instances, more than one carrier was seeking to provide specialized services over the same route. To deal with this situation, the FCC instituted a broad rulemaking inquiry designed to permit consideration in one proceeding of the policy questions raised by these numerous applications. Specialized Common Carriers, 24 F.C.C.2d 318 (1970) (Notice of Inquiry)." MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983)

1970 Petition for Reconsideration Denied, 21 FCC 2d 190 (1970)

1971

• Specialized Common Carrier Services decision stating that common carriers could offer only specialized services. FCC Docket 18920, "Specialized Common Carrier Services," First Report and Order, 3 June 1971, 29 FCC 2d, 872.
  • "In June 1971, the FCC handed down its Specialized Common Carriers decision, approving in principle the entry of specialized carriers into the long distance telecommunications field, and declaring as a matter of policy that there should be open competition in the specialized services to which the decision applied. 29 F.C.C.2d 870 (1970). Because AT&T, reversing its earlier position, agreed to negotiate with MCI and other new entrants for local interconnections, the FCC elected to defer consideration of MCI's claim that AT&T was misusing its power over local telephone service to gain a competitive advantage over potential specialized competitors.

    The FCC's Specialized Common Carriers decision was hardly a model of clarity. The decision did not define the specialized services to which it referred, nor did it define the corresponding obligations that the FCC expected the general carriers (primarily AT&T) to assume in order to assist the new carriers. AT&T contended, both at the time of the FCC decision and throughout the pendency of this lawsuit, that the Specialized Common Carriers decision authorized only point-to-point private line services not requiring switched network connections, and that the obligations of the Bell System extended only to providing local distribution facilities for these point-to-point private line services. MCI, by contrast, has consistently taken the position that the Specialized Common Carriers decision authorized it to provide FX and CCSA type services, as well as point-to-point private lines, and that AT&T had a corresponding obligation to provide it with the switched network connections required for these services. MCI also contended, both before and after the Specialized Common Carriers decision, that AT&T was obligated to provide it with local distribution facilities at the same rate at which AT&T provided such facilities to Western Union, under a longstanding contract between those two carriers. AT&T disagreed, claiming that the contract then in effect with Western Union did not reflect AT&T's current costs, and that the price charged to MCI for local distribution facilities should be set so as to recover AT&T's costs on a current basis.

    In September 1971, AT&T entered into interim contracts with MCI defining the kinds of interconnections that AT&T would provide for MCI's initial Chicago-St. Louis route and establishing the price for those interconnections. These contracts did not permit switched network connections for FX or CCSA type services, nor was the price set by the contracts for local distribution facilities comparable to that charged to Western Union.

    During this same time period, the original MCI investors joined forces with William McGowan, an experienced business executive and engineer, to form a venture that envisioned the eventual construction and operation of a nationwide long distance telephone system. After scrutiny of the market it believed had been opened by the Specialized Common Carriers decision, MCI created a plan contemplating sales of 74,000 circuits (leased telephone lines) having an average length of 500 miles per circuit, or approximately 37 million circuit miles14 by the end of 1975. According to this plan, MCI expected its revenues to average $1.00 per circuit mile excluding AT&T's local connection charges, which MCI intended to pass on to its customers. Projected annual revenues for 1975 were approximately $350 million. Armed with these projections, MCI proceeded to raise $110 million by June 1972, making it one of the largest start-up ventures in the history of Wall Street. The funds were raised after review and analysis by leading lenders and large equipment suppliers who were either lending the funds or underwriting or guaranteeing the financing." MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983)

1972

• June 22: MCI became a publicly traded company.
• January 1 MCI initiates service
  • "MCI commenced operations over its Chicago-St. Louis route on January 1, 1972. In the fall of 1972, MCI began construction of the first segment of its nationwide system, extending east and south from the original Chicago-St. Louis route. MCI initially expected to complete the first portion of its national network and commence customer service over major parts of the system by late summer 1973. Expansion to a second and a third group of smaller cities was to follow over the next three years. MCI planned to fund these capital expenditures from its initial $110 million capitalization, from substantial additional anticipated financing and from operating revenues. During late 1972, while construction was progressing, MCI entered into negotiations with AT&T over the provision by AT&T of interconnections and local distribution facilities on the expanded MCI system. Because MCI had previously experienced difficulty obtaining satisfactory interconnections for its Chicago-St. Louis segment, MCI hired an experienced lawyer-negotiator to secure a national interconnection agreement with AT&T that would permit MCI to serve the entire market it believed the FCC had opened. These negotiations began in September 1972, and continued with little progress for the next nine months." MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983)

1973

• "In August 1973, with negotiations still pending, and without informing MCI, AT&T decided to file with forty-nine of the state utility commissions interconnection tariffs that would be equally applicable to all carriers - including MCI and Western Union. By filing interconnection tariffs with the state commissions rather than with the FCC, AT&T made it more difficult for MCI to oppose the tariffs, since, in the words of one AT& T official, the interconnection "controversy would spread to 49 jurisdictions." PX 2148 at 2031. Even after making this unilateral tariff decision, AT&T continued to "negotiate" with MCI. After MCI accidentally learned of the state tariff plan, however, AT&T formally broke off all contract negotiations."MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983)
• " November 2, 1973, MCI filed a complaint in federal district court under section 406 of the Communications Act asking that AT T be ordered to provide interconnections for these services." MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983)
  • "On December 31, 1973, the United States District Court for the Eastern District of Pennsylvania issued a preliminary injunction ordering AT&T to provide all of the interconnections sought by MCI, on the theory that such interconnections were contemplated and required by the FCC's Specialized Common Carriers decision. MCI Communications Corp. v. AT&T,369 F. Supp. 1004(E.D. Pa. 1973). AT&T provided the required interconnections, but immediately appealed the district court's injunction. Meanwhile, the FCC, on December 13, 1973, issued its own order requiring AT&T to show cause why it should not be held to have violated the Specialized Common Carriers decision by refusing to provide the interconnections requested by MCI" MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983)

1974

• Mar 6, 1974 MCI files antitrust suit against AT&T. MCI v AT&T, 462 F.Supp. 1072 (ND Illinois) [Brenner p 12] At the time, AT&T is the largest corporation in the world. [Porticus Western Union]
• "On April 16, 1974, despite assurances that the FCC's "show cause" decision was expected "any day now," and despite FCC warnings that disconnection of MCI's customers would violate the Communications Act, AT&T ordered its local operating companies to disconnect MCI's customers on twenty-four hours notice. MCI alleged that the resulting disconnections caused turmoil among its customers and seriously damaged its reputation for reliable service. On April 23, 1974 - eight days after the Third Circuit had vacated the injunction obtained by MCI - the FCC issued a decision ordering AT&T to provide the disputed interconnections. Bell System Tariff Offerings of Local Distribution Facilities for Use by Other Common Carriers, 46 F.C.C.2d 413, aff'd sub nom. Bell Telephone Co. v. FCC, 503 F.2d 1250 (3d Cir. 1974), cert. denied, 422 U.S. 1026, 95 S. Ct. 2620, 45 L. Ed. 2d 684 (1975). The FCC held that it had intended to include both FX and CCSA services within the terms "specialized" or "private line" services as those terms were used in the Specialized Common Carriers decision. 46 F.C.C.2d at 425-27. AT&T provided the requested interconnections within ten days of the FCC's order." MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983). See also [Brenner p 12]
• MCI launches Execunet (forerunner of MCI's Long Distance service)
  • MCI v FCC & AT&T, 515 F.2d 385, June 27, 1974 ("We hold, then, that the time for filing petitions for review of the final orders and decisions complained of began to run on the date the Commission publicly released in complete text the order and opinion denying the petitions for administrative rehearing. Petitioners filed their petitions for review within that period, and thereby summoned our jurisdiction to review. It follows that AT&T's motion to dismiss must be denied.")
  • "In October 1974, MCI filed a tariff with the FCC for what the tariff referred to as metered use private line services, principally a service called "Execunet." Although the FCC did not immediately perceive it as such, this tariff was apparently designed to permit MCI to provide ordinary switched long distance service to users in any city to which its microwave system extended. See MCI Telecommunications Corp., 60 F.C.C.2d 25, 40-43 (1976) (the "Execunet decision"). When the FCC discovered the nature and purpose of the new tariff, it declared the tariff unlawful and ordered MCI to discontinue providing ordinary long distance message service on the ground that the Specialized Common Carriers decision limited MCI's authorization to the provision of private line services. 60 F.C.C.2d at 35-44, 58.

    MCI appealed the FCC's Execunet decision to the Court of Appeals for the District of Columbia Circuit and, in July 1977, the Court of Appeals set the decision aside. MCI Telecommunications Corp. v. FCC, 561 F.2d 365 (D.C. Cir. 1977), cert. denied, 434 U.S. 1040, 98 S. Ct. 781, 54 L. Ed. 2d 790 (1978). In its opinion, the Court of Appeals assumed, without deciding, that "a service like Execunet was not within the contemplation of the [FCC] when it made the Specialized Common Carriers decision," 561 F.2d at 378, but held that the FCC had not conducted a sufficient hearing - either during the Specialized Common Carriers proceeding or at any subsequent time - to justify any limitation on the operating authority of MCI and the other new specialized carriers. Id. at 378-80.

    This decision by the District of Columbia Circuit - handed down long after the events involved in the instant case occurred - rendered virtually meaningless the debate between MCI and AT&T over the proper interpretation and definition of the specialized private line services to which the Specialized Common Carriers decision applied. AT&T also claims that it was only by virtue of this Court of Appeals decision that MCI was able to achieve profitability since, according to AT&T, MCI's costs for private line services (including FX and CCSA) substantially exceeded the rates AT&T was then charging its large users under the Telpak tariff. See infra, pp. 1099-1100." MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983)

• November 20: DOJ files antitrust lawsuits against AT&T. [DOJ Press Release] [Hagley Taking on AT&T] "Charged the defendants with"
• "Obstructing the interconnection with the Bell System of Specialized Common Carriers, firms which transmit voice, data, and other telecommunications on a private line basis, such as a reqional telephone network designed to serve the various offices of a particular company;
• "Obstructing the interconnection of Miscellaneous Common Carriers, firms which transmit audio and video programming for broadcasters, such as a microwave company which transmits programs from a television network to its affiliates;
• "Obstructing the interconnection of Radio Common Carriers, firms which provide land mobile telecommunications services in .competition with franchised telephone companies, such as firms which provide telephone service for automobiles and paging devices;
• "Obstructing the interconnection of Domestic Satellite Carriers, the few firms which transmit voice, data, and other communications on a private line basis via satellites;
• "Obstructing the interconnection of customer provided terminal equipment and refusing to sell terminal equipment, such as telephones, automatic answering devices or switchboards, to subscribers; and
• "Directing the majority of Bell System telecommunications equipment purchases to Western Electric.""

1975

• FCC orders MCI to cease Execunet

1976

• District Court Judge Waddy rules that AT&T status as an FCC regulated common carrier did not give it immunity from anti trust lawsuits. US v ATT, 427 F.Supp. 57, Sec II (DCDC 1976) ("The Court therefore concludes that the Communications Act does not expressly, or impliedly, repeal the antitrust laws. Neither the language, nor the legislative history of the Communications Act supports the conclusion that Congress intended by that Act to grant a total, blanket immunity to defendants from application of antitrust laws, and to place exclusive jurisdiction over all their conduct in the Federal Communications Commission.")
• MCI System Map 1976, Hagley Digital Services

1977

MCI v. FCC & AT&T, 561 F.2d 365, July 28, 1977 (Court overturns FCC decision re Execunet) "We have today decided that the Commission erred in rejecting MCI's Execunet tariff as unauthorized. The Commission has no general authority to insist that carriers receive its approval before filing tariffs proposing new services or rates. Only if the Commission has determined that the public convenience and necessity may require that new services receive advance approval can it then reject a tariff as unauthorized. In so holding we have not had to consider, and have not considered, whether competition like that posed by Execunet is in the public interest. That will be the question for the Commission to decide should it elect to continue these proceedings. In that eventuality the Commission must be ever mindful that, just as it is not free to create competition for competition's sake, it is not free to propagate monopoly for monopoly's sake. The ultimate test of industry structure in the communications common carrier field must be the public interest, not the private financial interests of those who have until now enjoyed the fruits of de facto monopoly."

1978

• Judge Waddy retires; Judge Harold Greene, on his first day on the Bench, draws the AT&T case.
• MCI v. FCC, 580 F.2d 590 (May 8, 1978) FCC ruled that AT&T did not have to interconnect with Execunet. Court again "angrily" overturns FCC interconnection order as an attempt to circumvent its earlier order
• [Steven Greenhouse, NYT May 28, 1985 "MCI's lawyers contended that A.T.&T. had retarded MCI's growth and its entry into the long-distance market by refusing to give interconnection through its local operating companies. This, MCI's attorneys said, forced the company to scale back on the number of cities to which it furnished services and made it harder to raise capital to expand."]

1980

June 13, Court rules in favor of MCI in antitrust suit, awarding MCI $1.8B from AT&T

1981

• March: After pretrial attempts to settle failed, the US v ATT case went to trial.
• Sept 11: Judge Greene denies AT&T's motion to dismiss. 524 F.Supp. 1336 (1981)

1982

• Jan 8 Antitrust suit settled with AT&T agreeing to divestiture of the BOCs. The theory was the separation of those parts of AT&T which constituted natural monopolies, the BOCs, and those parts of AT&T that were potentially competitive, the long distance service.
• AT&T would be broken into small companies, Bell Operating Companies and AT&T long distance (Western Electric manufacturing would go with AT&T, be absorbed and become AT&T manufacturing). BOCs would be local operating companies that were not permitted to enter the long distance, information service or manufacturing markets. They would provide equal access to any long distance company . The BOCs got the use of the trademark and logo "Bell"
• The constraints of the 1956 consent decree would also be lifted, allowing AT&T long distance to enter into the information services market.
• Aug 24 The Modified Final Judgment was approved and entered

1983

• MCI v. AT&T, 708 F.2d 1081 (7th Cir. 1983) AT&T had appealed the $1.8B award, and successfully reduced it to $113.3 m [Hagley Taking on AT&T][Steven Greenhouse, NYT May 28, 1985 ("A jury in a Federal antitrust case today awarded the MCI Communications Corporation $37.8 million in its suit against the American Telephone and Telegraph Company. MCI had sought $5.8 billion... The award will be tripled to $113.3 million by Federal statute")] [MCI's Damage Award Only $37.7 Million in AT&T Antitrust Case May 29, 1985|BRUCE KEPPEL Los Angeles Times (Although agreeing Tuesday that giant AT&T illegally sought to keep its much smaller competitor MCI Communications out of the long-distance telephone business in the early 1970s, a federal court jury awarded MCI damages of only $37.7 million--a small fraction of the $5.8 billion that MCI sought."")]

1984: Jan 1 Divestiture Effective

• AT&T becomes AT&T and the seven RBOCS:
• AT&T retained $34B in assets of the $149.5B in assets it had the day before. [AT&T: History: Post Divestiture] [AT&T History]
• "Fred Henck, publisher of Telecommunications Reports and Bernie Strassburg, retired Chief of the Common Carrier Bureau, in their book covering the divestiture of AT&T estimated that legal fees and settlements cost AT&T more than $5 billion. (A Slippery Slope - The Long Road to the Breakup of AT&T)" - William von Alven, Bill's 200 Year Condensed History of Telecom, CCL 1998

1987

DOJ recommends to Judge Greene that the BOCs be permitted to manufacture telephone equipment and to enter into the long distance and enhanced services markets. Sept. 1987, Judge Greene finds that BOCs have monopoly control over local market and rejects most of DOJ recommendation. Judge Greene permits BOCs to enter the enhanced services / information services market.

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Timeline

1963

• AT&T introduces touch tone telephone service. [Picture of 1963 Touch Tone Phone] [Bell Labs History]
• Western Electric begins production of the Electronic Switching System. [Iardella 38]
• AT&T installs first electronic switch in a private branch exchange in Coco Beach, Fl (NASA??). [Porticus Western Union]

1964: There are 23 Bell Telephone companies, of which 21 AT&T owns more than 50% of the stock (they are subsidiaries) [Iardella 19]

1. New England Telephone and Telegraph
2. New York Telephone
3. New Jersey Bell Telephone
4. Bell Telephone of Pennsylvania
5. Diamond State Telephone (Delaware)
6. Chesapeake and Potomac Telephone Co (Wash DC)
7. Chesapeake and Potomac Telephone Co of Maryland
8. Chesapeake and Potomac Telephone Co of Virginia
9. Chesapeake and Potomac Telephone Co of West Virginia
10. Southern Bell Telephone and Telegraph
11. Ohio Bell
12. Michigan Bell
13. Indiana Bell
14. Wisconsin Bell
15. Illinois Bell
16. Northwestern Bell
17. Southwestern Bell
18. Mountain State Telephone and Telegraph
19. Pacific Northwest Bell
20. Pacific Telephone and Telegraph
21. Bell Telephone of Nevada
22. Southern New England Telephone (AT&T only owned 20%)
23. Cincinnati Bell (AT&T only owned 30%)

1965

• First Electronic Switching Systems installed in Central Offices, one in Succasunna, NJ, and the other in Baltimore. [Picture of installation of first electronic switch]
• FCC initiates first general rate investigation of AT&T. [Strassburg 12]

Computer Inquiries

1966: FCC initiates the Computer Inquiries. contemplating the regulatory response to both computers operating the network and computers being operated over the network.

1968 :: Carterfone

Opening AT&T to interconnection with "foreign attachments" (customer premises equipment a.k.a. modems, fax machines, answering machines)

1969:

• AT&T declines to bid on ARPA's RFQ to build the first ARPANet IMPs.
• FCC opens long distance telecommunications market up to competition through the approval of the MCI application. This was followed by a multitude of applications to enter the specialized microwave service market.
• Pres Nixon "calls" Astronauts on the moon using a C&P Telephone.
• UNIX operating System [The New AT&T 2005]

1971: AT&T is offered the opportunity to take over, own and operate ARPANet. "AT&T could have owned the network as a monopoly service, but in the end declined. "They finally concluded that the packet technology was incompatible with the AT&T network," Roberts said." [Wizards p. 232]

1972: AT&T decides not to take over control of the Internet.

1973 FCC authorizes MCI to offer foreign exchange service and AT&T was ordered to interconnect with MCI's service

1975 "AT&T installs the world's first digital electronic toll switch, the 4ESS®, in Chicago. This switch could handle a much higher volume of calls (initially 350,000 per hour) with greater flexibility and speed than the electromechanical switch it replaced." [AT&T: History: Milestones] [Picture of Control Room of the first 4ESS Switch 1975]

1977

• "In Chicago, AT&T installs the first fiber optic cable in a commercial communications system." [AT&T: History: Milestones]
• AT&T sets up its first NOC, replacing network control centers. [AT&T: History of the AT&T Network] [Picture of the AT&T NOC, 1987]
• "Stockholders at AT&T's annual meeting approve changing the legal name of the company from American Telephone and Telegraph Corporation to AT&T Corp." [AT&T: History: Milestones]

1978

• AT&T tests cellular telephony. [Porticus Western Union]
• "In April 1978, AT&T was supposed to develop something called the Bell Data Network. They never did." [Babbage (Kleinrock) 27] [Nerds p 115] AT&T filed petition with FCC July 10, 1978 for FCC approval that it did not need Sec. 214 authorization from the FCC to build the BDN; the AT&T filed for Sec. 214 approval, which was granted by the FCC. To offer BDN and to comply with Computer II Sep Sub requirements, AT&T formed American Bell Inc [History of Telenet 42]

1979: " In 1979 they started talking about AIS, Advanced Information Service, another network they never made." [Babbage (Kleinrock) 27] [Nerds p 115]

The UNIX Operating System 1982

1982

• "Then finally in 1982, they came out with Net 1000. In 1986 they closed down Net 1000; they lost a billion dollars on that effort." [Babbage (Kleinrock) 27] Putting it on the Line, Network World (March 26, 2001) [Nerds p 116]
• AT&T announced Bell Packet Switching Service. The FCC responded to AT&T's application saying "it was uncomfortable with Bell's proposal because it appeared the service had been designed so that American Bell would be the only company that could use it." [Bell Turned Down on Data Link Rate, NY Times (July 30, 1982)] ATT Tariff FCC No 270 Rates and Reg for Bell Packet Switching Service, 92 FCC2d 48, FCC 82-335 (1982). [Nerds p 115]

AT&T Accunet

1983

• AT&T resubmitted the application with the new name Basic Packet Switching Service (BPSS), and was approved for service.. [Nerds p 115] AT&T renamed BPSS as Accunet. In 1985 the FCC ordered AT&T to withdraw Accunet Packet Service from service on the grounds that[History of Telenet 42]
• "it gives AT&T Information Service (AT&T IS) unreasonable preference in its provision of services. AT&T-IS was given rates lower than those offered other customers, prompting FCC concern that other AT&T-C ratepayers, rather than stockholders, were subsidizing the money-losing APS. AT&T IS was the primary user of APS at 94.8 percent." -- AT&T Vows Commitment to Packet Service Following FCC Accunet Withdrawal Order, Communications News (August 1985) (republished on Find Articles website)
• AT&T introduces cellular mobile telephone service in Chicago. [Porticus Western Union] [The New AT&T 2005]
• AT&T installs its first fiber optics in its long distance network. [Picture of fiber installation 1983]
• AT&T launches Net 1000. ("Net 1000 consisted of multiple distributed processing centers, each containing several DEC VAX minicomputers and IBM Series 1 mini- computers as front end communication processors.;") [History of Telenet 42] The centers were linked together by BPSS.
• "The results have indeed been disappointing. To develop the product, envisioned as a network enabling many dissimilar computers to talk to one another, AT&T has devoted 10 years, hundreds if not thousands of employ ees, and an estimated $1 billion. In the process, the system has had five names and suffered repeated delays, and even now never fulfilled its original purposes: to stave off International Business Machines Corp., in the fast paced world of data communications. Today, the product, now called Net 1000, has only a handful of paying customers.” [“Missing Links: AT&T Plan to Market a Computer Network Hits Snags Repeatedly — After 10 Years and $1 billion, Few Complex Systems are Currently Operating — ‘This Could Die on the Vine’,” Claudia Ricci, Wall Street Journal, July 13, 1984.]

1984 "AT&T reduces long distance rates by 6.4 percent, as non-traffic sensitive costs begin moving from rates to local-company administered access charges. This was the first in a series of rate reductions over the next six years that totaled approximately forty percent." [AT&T: History: Milestones]

1988

• Filing and Review of Open Network Architecture Plans, Memorandum Opinion and Order, 4 FCC Rcd 2449 (1988) ("approving AT&T's plan involving a basic packet switching service underlying an enhanced protocol processing service")

1991

• AT&T experiences several major network outages. Outage results in the Congressional Report "Asleep at the Switch" and the creation of the FCC FACA the Network Reliability and Interoperability Council. [AT&T Failure of 1990] [Making the Connection, Disaster Recovery] [Reed Hunt, Avoiding Digital Disruptions 1997]
• "One such merger came in 1991 when AT&T acquired computer maker NCR in a $7.3 billion deal designed to give the company's customers an edge as communications and computing converged." [AT&T: History: Post Divestiture]

1994

• "Another, the agreement to acquire McCaw Cellular in 1994 for $11.5 billion, gave AT&T direct access to consumers for the first time in a decade. The unit, renamed AT&T Wireless, established AT&T as a leading force in the fast growing wireless telecommunications industry." [AT&T: History: Post Divestiture] AT&T's partnership with McGraw Cellular gave it its first, post-divestiture, local access connection with customers. AT&T Wireless would be acquired by Cingular in 2004, as AT&T abandoned the local access market.
• Chesapeake and Potomac Telephone Co. of Baltimore City (1891) becomes Bell Atlantic. Will merge with NYNEX to become Verizon [Baltimore Sun]

1995

• FCC declares AT&T non dominant in the long distance market (long distance market is effectively competitive).
• AT&T changes the name of AT&T Technologies (formerly Western Electric) to Lucent Technologies - and spins it off

1996

Telecommunications Act of 1996 allows BOCs to enter the long distance market if they can demonstrate to the FCC that their local markets are competitive

1997

AT&T re-establishes Western Electric for the construction of electric tubes [WE History]

1998

acquired TCI; creates AT&T Broadband service. Assumption is that local telephone service is the key source of revenue and source of market strength - goal is to enter local telephone market.

1999

• acquired IBM Networks; Identified as one of five major backbones [Cremer p 14 n 12]
• "In 1984, AT&T carried an average of 37.5 million calls per average business day; in 1989, the equivalent volume was 105.9 million, and in 1999 270 million." [AT&T: History: Post Divestiture]

2000

• AT&T acquired CERFNET

2002

• Comcast acquires AT&T Broadband

2004:

• Cingular acquires AT&T Wireless
• AT&T withdraws from residential markets:: "The company also announces a withdrawal from the consumer market to focus on business networking and VoIP." [The New AT&T 2005] Some analysis argue that the BOCs placed an interconnection / access charge squeeze on AT&T, making its entrance and performance in the local residential market untenable - explaining why AT&T sold off AT&T Wireless and AT&T broadband

2005 acquired by SBC and renamed AT&T

2006 acquired Bell South (along with Cingular - owned by SBC and Bell South - which had acquired AT&T Mobility in 2004)

2007: Cingular signs exclusive deal with Apple of the iPhone

Hearing: Consumer Wireless Experience, Senate Commerce Committee, June 17, 2009 (discussing the exclusive deal)

2010: FCC Broadband Plan recommends that FCC work on transition of the network from PSTN to IP

2011

• AT&T launches CDN service.
• AT&T T-Mobile Merger (Blocked)
• AT&T's exclusive deal with Apple for the iPhone expires

2012 AT&T / Facetime

2013: FCC releases proceedings addressing the migration from PSTN to IP, and the termination of the PSTN

2014 PSTN Transition Trials

• AT&T / Netflix Interconnection Dispute
• Nearly 1.2 Million Add Broadband in the First Quarter of 2014, Leichtman Research Group (May 20, 2014), ("In 2014, the top 17 BIAS providers represented 93% of the market. The top providers were Comcast (21 million subscribers), AT&T (17 m), Time Warner Cable (now part of Charter, 12 m), Verizon (9 m), Centurylink, (6 m), Charter (5 m), and Cablevision (3 m).")

2015

AT&T acquires DirecTV

References

Caselaw

• MCI TELECOMMUNICATIONS CORPORATION, PETITIONER 93-356 v. AMERICAN TELEPHONE AND TELEGRAPH COMPANY UNITED STATES, et al., PETITIONERS 93-521 on writs of certiorari to the united states court of appeals for the D.C. Cir. [June 17, 1994]
• United States v. W. Elec. Co., 673 F.Supp. 525 (D.D.C. 1987), aff’d in part, rev’d in part, 900 F.2d 283 (D.C. Cir. 1990), cert denied MCI Comm. Corp. v. United States, 498 U.S. 911 (1990)
• Mci Communications Corporation and Mci Telecommunications corporation, Plaintiffs-appellees, v. American Telephone and Telegraph Company, Defendant-appellant, 708 F.2d 1081 (7th Cir. 1983)
  • Argued April 19, 1982.
  • Decided Jan. 12, 1983.
  • As Modified Feb. 9, 1983.
  • As Modified on Denial of Rehearing April 11, 1983.
  • As Modified After Denial of Rehearing April 18, 1983.
  • Certiorari Denied Oct. 1, 1983. See 104 S. Ct. 234
• MCI v. FCC & AT&T, 561 F.2d 365, July 28, 1977 (Court overturns FCC decision re Execunet)
• United States v. AT&T, 552 F.Supp. 131 (DDC 1982) (Consent Degree)
  • aff'd sub nom. Md. v. United States, 460 U.S. 1001 (1983)
  • vacated sub nom. United States v. W. Elec. Co., No. 82-5192 (HHG), 1996 WL 255904 (DDC Apr. 11, 1996) (on account of the Telecommunications Act of 1996)

Books

• Cantelon, Philip L. (1993).The History of MCI: 1968–1988, The Early Years. Dallas: Heritage Press.LCCHE8864.M375C361993
• Kahaner, Larry (1987).On The Line. Warner Books.ISBN 0-446-38550-6.
• William G. McGowan's MCI, 1968 to 1991(Online exhibit produced by theHagley Museum and Libraryon the life of MCI CEO William McGowan) ("While AT&T would buy an entire farm to build a tower, MCI would negotiate for only the use of the space needed for the tower and equipment shed. When one landowner refused to allow tower construction, the MCI construction crew offered to decorate it every Christmas (she finally agreed). The MCI construction crews thought of themselves as pioneers")

Papers

• Richard T Shin & John S Ying, Unnatural Monopolies in Local Telephone, 23 RAND J Econ 171 (1992).
• David Allen, New Telecommunications Services: Network Externalities and Critical Mass, 13 Telecomm. Policy 258 (1988)
• David S Evans & James J Heckman, A Test for Subadditivity of the Cost Function with an Application to the Bell System, 74 Am. Econ. Rev. 615 (1984)
• Baldev Raj & HD Vinod, Bell System Scale Economies from a Randomly Varying Parameter Model, J Econ Bus 247 (1982)